The sustained fall in the market indices continued on Tuesday too. Sensex lost over 500 points from its peak on Tuesday and the correction was really disappointing as it came after a very strong start. Tuesday marked the ninth successive day of corrective markets that has wiped out Rs.5.75 trillion worth of investor wealth. With over 330 stocks touching their 52-week low, the pain in the mid caps and small caps was a lot more acute. Technology actually led the markets down on Tuesday with heavyweights like TCS correcting sharply, leading to the huge sell off in the last hour of trade.
In what was long overdue, the Indian Cabinet has now permitted captive coal mines to sell coal in the open market. Under the new policy approved by the Cabinet, captive coal mines will be permitted to sell 25% of their captive coal output in the open market. This is also expected to improve the response for captive coal mining auctions. Earlier, the government had permitted companies to bid for coal mines solely for the purpose of selling in the open market. This could reduce state monopoly over coal, which is currently dominated by Coal India and its regional subsidiaries.
Generic pharma companies may have been struggling for the last few years due to rising competition and greater consolidation among US buyers. However, the API companies within the pharma space have seen revenues and profit margins grow in the last few quarters. This has been driven by China shutting down its polluting API plants resulting in a supply crunch for APIs. The APIs are raw materials for generics and formulations and the price of these APIs has been steadily rising in the last few quarters. For the time being, that could be the redeeming feature for the pharma companies.
Brent crude retreated from higher levels on Tuesday but held on to $66.12/bbl level on supply concerns.
Even though crude prices failed to hold on to its recent peak, the upward pressure on prices appears to be quite strong. The combination of OPEC supply cuts as well as the supply disruption created by the Venezuelan sanctions, took its toll on prices. A lot would predicate on the outcome of the trade talks, and markets are expecting a resolution well before the March 01st deadline. Considering India’s import dependence on oil, it will be a key parameter in the trade deficit numbers.
WTO has pegged the global trade for the Jan-Mar quarter at a 9 year low. The WTO quarterly outlook indicator of seven trade parameters has touched the lowest level since March 2010. The report also points that countries with trade deficit, like India, could be vulnerable. In the midst of these ominous trade slowdown signals, the China-US trade talks resumed on Tuesday even as the US sought stable Yuan assurance from China. Trump now wants a pledge from China that it will not devalue the Yuan to make Chinese exports artificially attractive. In the recent past, China has been gradually weakening the Yuan to offset the impact of American tariffs. Both the countries are working against time as the tariff freeze deadline ends on March 01st. This stand-off is the key to global trade.
Government announced new rules to encourage start-ups in India and the notification was basically intended to placate the fear of angel tax, which was to be levied on unlisted companies that placed shares at a premium to fair value. In case of unlisted companies, the government has exempted investments up to Rs.25 crore from angel tax. This exemption will also be extended to investments made by NRIs. Also the definition of eligible start-ups has been increased from 7 years to 10 years from the date of incorporation. The announcements were made by Suresh Prabhu.
